Week One notes
Week One notes ACCT 200 006
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This 7 page Class Notes was uploaded by Randi myers on Sunday August 30, 2015. The Class Notes belongs to ACCT 200 006 at University of Tennessee - Knoxville taught by Vicki L Mayfield (P) in Fall 2015. Since its upload, it has received 23 views. For similar materials see Foundations of Accounting in Accounting at University of Tennessee - Knoxville.
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Date Created: 08/30/15
Accounting 200 Dr Mayfield Chapter 1 The Role of Accounting in Business Stakeholders Entities with an interest in the business people who care about the successfailure of a business 0 External Stakeholders outside the business 0 Capital Market Stakeholders provide financing for a company to begin and continue its operations Lenderscreditors banks lend money to the business a Want it paid back with interest OwnersStockholders invest money in the business a Want a return on investment 0 Product or Service Market Stakeholders purchase the company s products or services or sell their products or services to the company Suppliers sell goods or services to the business Customers buy goods or services 0 Government Stakeholders federal state local and foreign collect taxes from the business and regulate business activities 0 Internal Stakeholders inside the business 0 Business Managers and Employees operate the business to earn profit Depend on continued success of the company Accounting an information system hat provides reports to stakeholders about the economic activities and condition of a business 0 Provides information to both external and internal stakeholders so they can 0 Evaluate the company s current health 0 Evaluate the company s future prospects Branches of Accounting 0 Financial Accounting preparing reports for external stakeholders 0 gives historical information to external stakeholders about Changes in financial condition during a period of time 0 Financial condition at a single point in time Snapshot of the business Managerial Accounting guide internal stakeholders to help with decisions about future 0 Projected financial statements 0 Daily progress reports Accounts and Financial Statements 0 Accounts summarize the effects of business transactions 0 Six account categories Assets resources used to create value a Ex property plant equipment Liabilities creditors claims on a business s assets Equity Owner s claims on assets Revenues sales fees earned Expenses fees used Dividends portion of profit paid to owners 0 Financial statements report financial condition of a business at a point in time and changes in the financial condition over a period of time 0 Four basic financial statements 0 Income statement Reports change in financial condition over a period of time o Retained earnings statement Reports change in financial condition over a period of time 0 Balance sheet Reports financial condition at a single point in time 0 Statement of cash flows Reports change in financial condition over a period of time Income Statement 0 Reports changes in financial conditions due to the operations of the company 0 During a period of time 0 Revenue Expenses Net Income Net Loss 0 Matching Concept setting expenses against revenues 0 Net Loss when expenses exceed revenues 0 Net Income when revenue exceed expenses Retained Earnings Statement 0 Changes in financial condition due to changes in retained earnings for a period Retained earnings the portion of a corporations net income that is retained in the business 0 A corporation may keep all of net income fro expanding operations or pay a portionall as dividends 0 Beginning Retained Earnings sum of all prior net income dividends paid Net income from income statement Dividends Ending retained earnings equity on balance sheet at the end of this period Balance Sheet 0 Reports financial condition as of a point in time Assets claims rights to the assets 0 Claims on company s assets consist of liabilities and stockholders equty o Liabilities rights of creditors o Stockholders owners equity rights of stockholders AssetsLiabilities stockholders equity 0 Accounting equationquot 0 reports financial condition of business on the last day of each accounting period 0 final result of the integrated financial statements Statement of Cash Flows 0 Reports change in financial condition due to the changes in cash during a period 0 Shows cash inflows revenue borrowing investments and cash outflows expenses 0 Organized around the three business activities 0 Operating investing financial 0 Net cash from operating activities net cash from investing activities net cash from nancing activities change in cash Business Activities 0 Operating activities using assets to earn revenues and profits O 0 Business engages in daytoday activities that generates revenues and expenses Day to day operations Customers and suppliers Revenue increase in assets from selling products or services Sales revenue received from selling products Fees earned revenue received from providing services Expenses costs used to earn revenue Cost of merchandise sold cost of sales cost of goods sold cost of the products sold Selling expenses costs directly related to the selling of a product or service Administrative expense other costs not directly related a Officer salaries Net income revenue exceeds expenses Net loss expenses exceed revenue Investing activities to obtain assets such as buildings and equipment to begin and operate company 0 0 Selling or buying assets with life greater than one year Purchasing Tangible assets physical resources Longterm tangible assets machinery buildings and land property plant and equipment Shortterm tangible assets cash and inventories Intangible assets patent rights to use in manufacturing a product nonphysical resources Longterm assets patents goodwill and copyrights are sold separately Prepaid expenses insurance or rent assets until they are consumed Accounts receivablerights to payments from customers who purchase merchandise or services on credit Financial activities to obtain necessary funds to organize and operate the company 0 Getting funds to start or grow the company 0 Debt Financing cash is acquired by borrowing This creates an asset cash an equal liability a payable 0 Equity financing cash is acquired by selling pieces of ownership in the company to investors This creates and asset and an equal equity 83015 1251 PM 83015 1251 PM